SCC Demanding Data in Future EE, DSM Cases

Two recent State Corporation Commission rulings on utility-sponsored energy efficiency and demand management programs produced contrary results for the applicants but a consistent theme of SCC skepticism in the absence of hard data and a demand for more data going forward.

The SCC last week approved all eleven new or continued programs proposed by Dominion Energy Virginia, which will cost its customers up to $226 million over five years.  That May 2 opinion is here.  But an April 30 opinion (here) rejected much of a similar request from Washington Gas and Light, citing a lack of specific results data from that company’s customers. 

The Dominion application has been the focus of previous Bacon’s Rebellion stories, including one highlighting an illuminating report generated to answer a judge’s question from the bench about costs and results.

Because of the 2018 Ratepayer Bill Transformation Act, the programs now need to pass only three of the four standard cost-benefit tests listed in the Code of Virginia.  The test many stumble on is the Ratepayer Impact Measure (or RIM test), which indicates whether the program is of general benefit to all the utility’s customers, not just those participating.  The Commission took judicial notice of the impact:

Senate Bill 966 (“SB 966”), passed during the 2018 Virginia General Assembly regular session, mandates that any energy efficiency program passing three of four specific cost-benefit tests must be found to be “in the public interest” and approved by this Commission, Dominion’s proposed Phase VII programs pass three of the four tests; therefore, the law has pre-determined that these programs are in the public interest and that they shall be approved.

 Another hot case issue and focus for Bacon’s Rebellion involved whether and when Dominion can collect compensation for revenue lost to these conservation programs, and the SCC punted that to the Dominion’s expected overall rate review in 2021.  The SCC was looking at one Code section dictating lost revenue recovery and but silence on the question in the 2018 bill.  “The General Assembly,” it broadly hinted, “will have ample opportunity to clarify its legislative intent” by 2021

The same three-tests-out-of-four standard is also applied to natural gas conservation programs, covered by a different part of Code.  Washington Gas and Light argued its proposals passed three out of four, but in some cases it did so with data from industry data manuals and not results from its own customers.

It sought approval of seven new or continued programs and four were rejected.  The costs and customer numbers involved are lower, with $5.2 million approved over three years, but they work the same way as with the electric utilities.  All ratepayers are hit with an extra charge on their bill to pay for providing energy efficient equipment or advice to a subset of customers.  In the natural gas realm these are referred to as the CARE Plan, for Conservation and Ratemaking Efficiency.  Based on their descriptions, they were very similar to Dominion’s proposals.

WGL argued in its final brief (here) that the staff was mistaken to reject industry-wide results in the technical manuals as evidence of future success and noted some of the programs involved are new with few participants so far, not enough for valid measurements yet.

The Commission should not deny the continuation of Washington Gas’s Residential Home Equipment, Commercial Direct Install and Commercial Heating Equipment Programs as the Company needs more time to collect and analyze statistically significant participant data in past program years….There are valid reasons why Washington Gas did not include EM&V results in the savings assumptions of the cost benefit analysis for some of its programs, it wrote.

The reasons were not enumerated in the record, which is far smaller than the paper-monster that the Dominion case became.  Only the SCC staff commented on the WGL application.  Future cases are likely to remain complex, with the SCC basically setting the same standard for WGL in one case that it set for Dominion in the other.  Here is how it summarized the requirement in the WGL decision:

Finally, any subsequent request by WGL to amend the CARE Plan approved herein, or to implement a new CARE Plan, shall: (a) incorporate the results from the annual reports required herein; (b) provide measured and verified evidence of energy savings to support any request to continue or modify programs designed for low-income or elderly customers; and (c) provide measured and verified evidence of energy savings and cost-effectiveness to support any request to continue or modify other programs approved herein and in the currently-approved CARE Plan. For clarification, the third requirement above means the Company shall use independently verified net benefits, including natural gas savings, as inputs in the Company’s cost/benefit analysis….

And for Dominion:

We direct that Dominion shall file, in every future rate adjustment clause proceeding under Code § 56-585.1 A 5, evidence of the actual energy savings achieved as a result of each specific program for which cost recovery is sought, along with revised cost-benefit tests that incorporate actual Virginia energy savings and cost data. We further direct Staff to investigate each such filing, to analyze the program-specific evidence on actual energy savings and the proximate cause thereof, and to report on its findings.

Unless or until, of course, some future General Assembly sets new rules.  Plenty of legislators without regard to party have proven quite willing to use Customer A’s money to provide a major benefit to Customer B, with some profit for the utility and the service contractor added in and no evidence required it helped anybody else.

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7 responses to “SCC Demanding Data in Future EE, DSM Cases

  1. I’m LOVING this!

    1. – “It’s an OUTRAGE” that the SCC “demands” that we prove these “conservation” programs are cost-effective. How DARE YOU! When we call these programs “Conservation”.. it’s obviously ipso facto – no more scrutiny is warranted – just rubber stamp it!

    2. – “look folks, we electric utilities are GUARANTEED a certain amount of value of our monopoly – and if folks use less electricity – they still have to pay whatever it takes for us to get the full value of our monopoly AND we are ENTITLED to full profit markup for these “Conservation” programs.

    These two things ARE the over-the-top arrogance and Chutzpah right in front of our faces … as many are clueless and the ones that are not – just whine and wring our hands!

    Jeezy Peezy

  2. Great work Jim.

  3. Steve’s analysis raises an interesting conundrum.

    On the one hand, the SCC is demanding that Dominion and other public utilities present data to demonstrate that their energy-efficiency (EE) programs deliver value. I think most people would find this defensible. No one benefits from programs that achieve incremental gains in EE at extravagant cost. Society should allocate scarce resources to where they yield the greatest benefit.

    But Washington Gas raises an interesting question. What about programs that are too new and un-tested? They might be extremely effective — but they haven’t been tried yet and no data yet exists.

    That is why pilot projects were invented. Test a program on a small scale or for a defined time period, collect data, and appraise the program effectiveness based on that data. The SCC should be encouraging pilot programs.

  4. Interesting about the Washington Gas CARE program. We are customers but I cannot say I was aware of the program.

    As far as Dominion, I think they are between a rock and a hard place. They would probably like to go with natural gas which is low cost, and charge us average price for electricity (huge profit), Dems want to mandate more expensive options, so that will either squeeze Dominion’s profits margins, or we just have adopt RGGI-state style very high elec costs.

  5. As far as I know, any utility capital investment qualifies to be put in the rate base and earn the authorized rate of return. In Dominion’s case this is 9.5 – 10%, based on past RACs and base rates. On a $200+ million investment in energy efficiency, the utility would receive a stream of profits over the term of the RAC of about $400 million (nondiscounted).

    Since all ratepayers must repay that $200 million initial outlay, plus any costs of financing, and the $400 million in profit, is it too much to ask for an analysis of whether these projects benefit those who are paying the bill?

    I am all for appropriate energy efficiency projects. Utilities do have the most information about customer usage and therefore have an advantage over independent providers, especially when the utilities withhold information that makes it difficult for energy service companies to assess past usage when estimating projects.

    In my view, good efficiency projects should have zero costs to other customers. The reward to the customer installing the project is the savings in long-term energy costs. The reward for the contractor is the basic profit on the job. The remaining customers would save because the peak is lower and overall energy use is less, saving them money.

    But under our current rules, the utility loses because they want to add to the rate base and sell more energy.

    This is a perfect example of why we need new rules for our utilities. Modern schemes would disconnect utilities from the need to sell more electricity or build unnecessary projects. They would prosper by providing useful services.

    The GA’s erasure of the need to assess the value of these projects to Dominion ratepayers was a simply a grant of more profit to the utility at the expense of its ratepayers. I continue to be astounded by why business leaders and policymakers throughout the state see this as a good thing. It results in their families and businesses paying more than should for energy.

    Our economic system was originally designed to reward companies that provided value to their customers. Now the emphasis is on seeking legislative favors or regulatory shortcuts to earn a profit. Progress indeed!

  6. re: ” What about programs that are too new and un-tested? They might be extremely effective — but they haven’t been tried yet and no data yet exists.”

    you can do this. You set it up for a defined time period and you REQUIRE all kinds of metrics to be collected and you DO NOT put it in the rate base.

    this is the problem. These utilities want cart blanche to proceed without collecting real data that proves it works.

    And you set up options – a variety of choices – pick some – and instrument them all and compare results so we know which ones are
    returning the best bang for the buck.

    The utilities have the data and know how to do it – but they don’t want that transparency and accountability – they just want the moolah!

    We have the tail wagging the dog in Virginia – in my view, not only the GA but the SCC – who at times looks strong and at other times compliant to the longer term wishes of Dominion. This may be a result of the GA holding a legislative Damocles sword over them – which ought to alarm us even more than simple greasing of the GA itself – they are essentially extending that reach to the SCC itself.

    In the arena is a 600lb gorilla with a 200lb club and the ratepayer is blindfolded with one arm behind them and getting the stuffings beat out of them on electricity in Va.

    It’s NOT about how “cheap” electricity is. It’s about consumers rights and abilities to seek better, cheaper, less polluting ways to use energy and they are up against a behemoth who overtly opposes it and intends to do things that benefit them and their investors and to heck with consumers.

    Tom has a more charitable view. He thinks they will behave if we only give them alternative paths to profits – and I do not disagree with changing the paradigm but until the GA gets some backbone they are the servants and handmaidens of the utilities. “Wishing” is not going to “work”.

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